In 2025, Kenya’s residential real estate sector delivered moderate but resilient performance, reflecting both ongoing demand and structural constraints within the broader property market. According to the Cytonn Annual Markets Review for 2025, the Nairobi Metropolitan Area (NMA) residential segment recorded average total returns of 6.6 percent, a 0.8 percentage-point increase compared to the 5.8 percent recorded in 2024. This performance was supported by a rise in the year-on-year average price appreciation to 0.8 percent from 0.4 percent, alongside an increase in average rental yields to 5.9 percent from 5.4 percent. The improvement in rental income was driven by higher effective rents, which rose to KSh 622 per square metre, up approximately 9.7 percent on a year-on-year basis. Overall transaction activity increased, indicating stronger investor and occupier interest across residential segments.
Within sub-segments, lower-mid-end satellite town apartments outperformed other classes, offering attractive returns of around 7.7 percent, attributable to higher price appreciation and robust rental demand. Detached lower middle homes also recorded solid gains, particularly in nodes such as Kitengela and Thika that have benefitted from improved accessibility and infrastructure. Across apartments, higher occupancy levels around 93.7 percent enhanced rental performance, while developer partnerships and new mixed-income housing projects indicated a gradual evolution in product delivery within key urban markets.
Looking ahead to 2026, we maintain a neutral outlook for the residential sector. Continued delivery under the government’s Affordable Housing Agenda, strong demographic trends, and expanding investor interest are expected to sustain demand for housing. However, challenges persist, including elevated construction costs, infrastructure bottlenecks, and limited access to development financing. These constraints are likely to keep growth moderate rather than exponential, with performance remaining driven by affordability and strategic location fundamentals more than speculative investment gains.
